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Sony boosts earnings forecast over jump in games, music revenue

The company had previously said it would lose $1.4 billion in its fiscal year ended March 31, but it has now revised that number down to 126 billion yen.

The PS4 is helping Sony generate more revenue and address its woes. Sarah Tew/CNET

Sony's last fiscal year went a little better than expected, thanks to three core segments it believes will carry it to profitability in the future.

Sony has forecast (PDF) a net loss of 126 billion yen ($1.05 billion) for the fiscal year ended March 31, an improvement over the company's earlier forecast in February, when it said it would likely post a loss of 170 billion yen ($1.4 billion). Sony said on Wednesday that its improvement is due to a stronger-than-expected revenue jump across its gaming, record label and digital camera sensors businesses. The company's financial services business also performed better than expected, boosting the company's operating income forecast.

This is the second time this year that the Tokyo-based firm has boosted its earnings forecast. In February, the company upped its forecast from an earlier prediction of a 230 billion yen loss. Sony also said at that time that it would generate revenue of 8 trillion yen. It's now saying that number will hit 8.2 trillion yen.

Sony's revised forecast seems to lend even more legitimacy to the strategy CEO Kazuo Hirai outlined in February focusing on four key divisions: the PlayStation gaming division, Sony Pictures, Sony Music and its devices business, which includes sensors and other components.

"Sony is positioning Devices, Game & Network Services, Pictures, and Music as the segments that will drive its profit growth over the next three years," the company reported to investors in February. "It will implement growth measures and engage in aggressive capital investment in these areas with the aim of achieving both sales growth and profit expansion."

Sony predicted that by focusing on those growth areas, it can generate an operating profit of over 500 billion yen (about $4.2 billion) for the 2017 fiscal year ending in March 2018. Sony said on Wednesday that it expects its operating profit for the fiscal year ended March 31 to hit 68 billion yen.

Such a resurgence would prove to be an historic rags-to-riches story for a company that was once one of the dominant forces in the technology industry. Many of its products, including televisions, gaming products and devices like the Walkman music player, established Sony as a leader and helped it achieve billions of dollars in profits in the 1990s and early 2000s. By the start of this decade, however, the company's business had started to falter as the PlayStation 3 initially failed to gain traction, the Walkman was a distant memory, and everything from digital cameras to mobile devices were getting hit hard by competitors.

Although Sony has been able to turn its gaming division around and focus its efforts in other areas, mobile continues to be a source of trouble as consumers opt for devices from Samsung, Apple, and countless China-based handset makers. In February, Sony acknowledged its woes in mobile, saying that the "challenging competitive landscapes" in that market has forced it to rethink its strategy. Over the next several years, Sony will focus on only a few territories to sell its products. The company also hasn't ruled out selling its mobile division.

Sony has already spun off its television businesses. It plans to also shed its audio and video segments and says it will continue to get rid of more business segments that are proving to be a drag on its financials.

So far at least, Sony's efforts to instill confidence and its own updates to forecasts have resonated with shareholders. The company's shares are up 58 percent, or $11.82, since the beginning of 2015. Sony's shares are up nearly 5 percent on Wednesday to $32.36 after it announced its revised forecast.

Sony's latest forecast update will likely be its last for the fiscal year ended March 31. The company is expected to announce its full-year results on April 30, but is bound by regulatory bodies to inform investors of any material modifications to its earnings forecasts when it becomes aware of them. The figures shared in Sony's forecast are not final and could be different when the company releases its final earnings.

Sony did not immediately respond to a request for comment.